PrintThe best news in this week’s June existing home sales report was not the increase in sales in the face of rising interest rates, which was certainly welcome news, but the fact that inventories declined despite record foreclosures during the first half of the year.
Total housing inventory at the end of June fell 0.7 percent to 3.82 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, down from a 9.8-month supply in May. Raw inventory totals are 14.9 percent below a year ago.
Inventories, of course, are the key to stabilizing markets across the country.
They have fallen steadily this year and are now almost down to where they were two years ago, before the waves of foreclosures triggered by resets of subprime loans set off the housing crash.
Increased sales, perhaps as many as half of them foreclosures, certainly deserve the lion’s share of credit for soaking up the foreclosure inventory and keeping inventories under control. We’re far from shore on the foreclosure front. Between those delayed by servicers and the unemployment-caused defaults that will continue until the overall economy improves, expect record or near-record numbers of REOs for the balance of this year, at least. New home starts, which have been at record lows, also deserve credit for not adding to the inventory.
A factor in the inventory picture that may be equally significant is the “pending supply,” the millions - roughly 8 million-homeowners who have chosen not to sell now but would like to, even if they are also buyers who would benefit from price declines. These are families in need of more space, empty nesters in need of less space, retirees who would rather be living in a resort destination, and others. Also included are those who would forego ownership to rent. Little attention has been paid on how the housing crash has warped, delayed or thwarted the desires of middle income households to make lifestyle changes.
Source: Calculated Risk
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